Digital invoicing: How to nudge paper systems closer to the shredder

What's the best way to manage that shift to e-invoicing?

Invoicing remains one of the last bastions of paper-based systems. Fortunately, a number of recent developments should help firms make the switch to digital, says Louella Fernandes.

It is hard to believe that, in the 21st-century digital age, one of the most business-critical documents - the invoice - is still created and sent mostly in paper format.

In 2010, of the 30 billion invoices sent in Europe, only 10 per cent were done so electronically. In a global economy where many other processes are being automated, a reliance on any paper-based business process seems archaic. But so far, attempts to move to true 100 per cent electronic invoicing have been hindered by market fragmentation, cost and concerns around legal standards and interoperability.

However, the emergence of managed services that provide a hybrid approach to total invoice management promise to help businesses make a gradual transition to electronic invoicing, by processing paper and electronic invoices based on buyer and supplier preferences.

E-invoicing can improve business efficiency by cutting the costs of handling invoices by up to 70 per cent

E-invoicing can cut the cost of handling invoices by up to 70 per cent, with print, paper and postage savingsPhoto: Shutterstock

A recent Ricoh study shows that on average, 42.5 per cent of all business-critical information is still in hard-copy format. There is no doubt that invoicing contributes to that figure, as it remains one of the last bastions of manual processing and is labour-intensive, inefficient, costly and error-prone.

Quocirca estimates the cost of processing paper invoices through manual means can range anywhere from €8 to €10 per invoice, which is significant when applied across the mountain of paper that many businesses process every day.

Manual processes can also result in slow invoice reconciliation, making it difficult to secure early-payment discounts, which in turn can result in poor supplier relationships.

Furthermore, companies that continue to rely on paper-based invoicing methods may have difficulty preparing audit trails for closing books and meeting the requirements for European VAT audits.

Ricoh's study also indicates that only 39 per cent of companies have the ability to follow an audit trail for all their business-critical documents. A high reliance on paper also comes at an environmental cost - not only in paper waste but also in the associated energy costs of transporting the physical invoices.

So it's unsurprising that more businesses want to implement electronic invoicing to remove manual processes, speed up invoicing cycles and eliminate non-value-add activities for accounts departments.

E-invoicing's direct cost savings

Benefits of e-invoicing are far-reaching. Quocirca estimates that e-invoicing can enhance business efficiency through reducing the costs of handling invoices by up to 70 per cent. The most obvious benefits are the direct cost savings in paper, postage and printing for the sender, as well as in accepting, processing and approving the invoice for the recipient.

These compelling drivers are now set to broaden e-invoicing adoption, enabling more organisations to begin the transition to electronic invoicing. In 2011, approximately five million European businesses are expected to send or receive electronic invoices.

Initiatives such as the European Commission's plans to revise the E-Signatures Directive in 2011 are a bid to encourage businesses to make more use of electronic invoices. Electronic invoicing is also part...